Borghetti defends the Qantas-Virgin duopoly

By David Flynn, May 9 2013

12 years since the collapse of Ansett, which ushered in a decade of near-monopoly dominance for Qantas, the expansion of Virgin Australia is undeniably putting competition back into the business travel equation.

But it’s also seen Australia’s aviation industry return to what is ostensibly a two-airline duopoly of Qantas and Virgin Australia.

While the two carriers tussle over the mainstream travel market, they’re also set to square off in the regional and low-cost sectors following Virgin Australia’s takeover of Perth-based Skywest and Tiger Airlines Australia.

However, Virgin Australia CEO John Borghetti says that concerns over the new duopoly are unfounded, and that it’s “chalk and cheese” compared to the old days of Qantas and Ansett.

“We should draw the distinction between the duopoly that was, and the duopoly that is” Borghetti tells Australian Business Traveller.

“The duopoly that was, saw two fully-fledged carriers covering all market segments.”

“Today we have two full service airlines at the top end, we have two budget carriers, and we actually have more than two regional providers.”

“So there’s actually more than two airlines and they’re covering very different market segments.”

Borghetti also sees Australia’s population as capping the number of profitable players in the aviation industry.

“Remember, we have a population of 23-24 million people – that’s not a lot of people in a country our size, and there’s a finite number of people that can sustain (airlines).”

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Is Borghetti right? Is Qantas-Virgin a better duopoly than Qantas-Ansett, or is just the lesser of the two-player evils? Share your thoughts below.

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

KG
KG

Qantas - Qantas Frequent Flyer

10 May 2011

Total posts 736

“So there’s actually more than two airlines and they’re covering very different market segments.”

Well Mr Borghetti, you try to package it nicely with your "more than 2 airlines" and "covering different market segments", but fact is that the companies are (for the majority) owned by the same parent company, so in effect we only have a duapoly (depsite different branding and marketing) and covering different segments. I believe that Tiger and Jetstar as well as Skywest and QantasLink are pretty much in the same markets. In the long run I am sure that prices will creep up again. His remark on the capped population also does not support the story, I read from it that basically Virgin and QF have now saturated the market so there is hardly any chance for a new entrant to get a piece of the pie (they will be pushed out of the market by QF and VA).

undertheradar Banned
undertheradar Banned

28 Oct 2011

Total posts 662

JB made a good point...Australia only has a population of around 23million..add to that the fact that most population/major infrastructure is coastal based...people gotta realise..WE AREN'T AMERICA..WE AREN'T CONTINENTAL EUROPE..WE AREN'T CHINA..WE AREN'T INDIA....we are a huge landmass/island continent with a relatively small population (even smaller that utilize air transport)  that can only sustain a handfull of airlines...airlines are businesses, that survive on profit..no profit=no business

07 Feb 2013

Total posts 14

You only need to take a look at the consolidation in America (6 major carriers into 3), & the appalling financial state of most European flag carriers to get the picture. 

In effect, Qantas & Virgin both keeping themselves honest (by necessity) with Jetstar & Tiger. Look at the real cost of airfares under Qantas - Ansett ~15 years ago vs. Qantas - Virgin today; the reality is that, even with only two players, competition is healthy & fares are as low as they've ever been. 

Any time there's been more than two (independent) mainline players in Australia in the last 20 years, it hasn't been that way for long... after Ansett folded, we had Virgin Blue, Impulse & QF... Impulse very quickly became Jetstar. While Tiger have been flying for a couple of years now, they have never made a profit & have only survived on the deep pockets of its Singapore parent - but even they have run out of time & patience. Blink & you missed Air Australia. Anyone else is regional (Skytrans, Skippers, Airnorth, REX...) or FIFO (Alliance, Cobham...)

Water - and most markets - find their level.

Virgin Australia - Velocity Rewards

23 May 2012

Total posts 268

“The duopoly that was, saw two fully-fledged carriers covering all market segments.”

“Today we have two full service airlines at the top end, we have two budget carriers, and we actually have more than two regional providers.”

“So there’s actually more than two airlines and they’re covering very different market segments.”

I think Mr John Borghetti is definitely right about that. It isn't really a duopoly in domestic Australia.

And the fact that since 2011, there was a duopoly in the business class end and it led to cheaper airfares and a much better product. It's a really good comparison between the transcontinental business class products, services and prices from around 2010 (when there was a monopoly) to 2012/13 (where we see a Qantas-Virgin duopoly).

AlG
AlG

04 Nov 2010

Total posts 674

I wasn't flying for work back when Ansett was around but I have certainly seen Qantas lift its game after Virgin Australia got into the game, and seen fares get cheaper and service more competitive. So if this is the result of a duopoly at the top end of the market then that's okay with me. Haven't flown regional airlines, have flown JQ a few times (not by choice) and don't think I would ever want to fly Tiger. But Boghetti's explanation works for me, we have multiple airlines pitching at different parts of the total travel market.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 279

The world sure has changed since the Qantas and Ansett era and before that Australian Airlines.The only thing that's missing is over at Virgin free activity packs for those of us with kids and if you are lucky Food to take from the flight with you.I won't forget one trip I did to Melbourne in 1989 for the Gold of the Pharoahs exhibition for while the rest of the class went on the Overland I was spared from the horrors of the then Overnight Adelaide to Melbourne Train and went on Ansett and got a free lunch on the way over.The Fare hasn't changed that much since I was a 6th Grader though even If It's now with Virgin.Back then being well under 15 It cost my parents $150 Today It's under $200 if you can get a good deal in advance.


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